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Public media are made possible by PNC and the United Black, Fond of Greater Cleveland, Inc.. Good afternoon and welcome to the City Club of Cleveland, where we are devoted to creating conversations of consequence that help democracy thrive.

It's Friday, December 6th.

And I'm Mark Ross, retired managing partner of TWC and president of the City Club Board of Directors.

It is an honor and privilege to introduce today's forum, which is the annual Sally Grizz Endowed Forum in honor of women, women of Achievement.

And today we are recognized and welcoming.

Beth M Hammack, President and Chief Executive Officer of the Federal Reserve Bank of Cleveland, or the Cleveland Fed, as it is often referred.

The Cleveland Fed is one of 12 regional Federal Reserve banks that comprise the Federal Reserve System, along with the Board of Governors in D.C. and the 11 other regional Federal Reserve banks.

The Cleveland Fed participates in the formulation of our nation's monetary policy, supervises banking organizations and provides payment and other services to financial institutions and the U.S. Treasury.

On August 21st, 2024, Beth Hamrick began her tenure as Cleveland Fed's 12th president.

In her role, Ms.. Hammack oversees 1100 employees in the bank's Cleveland, Cincinnati and Pittsburgh offices that serves Ohio Western Pennsylvania, eastern Kentucky and the northern panhandle of West Virginia.

She brings more than 30 years of experience in finance, capital markets and risk management, as well as service on several advisory groups to the U.S. Department of the Treasury and the financial industry.

Prior to her appointment as Cleveland Fed President, she was co-head of the global financing group at Goldman Sachs and a member of its management committee as president of the Cleveland Fed.

Ms.. Hammack is responsible for all bank activities and sets the organization's strategic direction and short and long term objectives.

Today, we will hear more about those objectives and some of her observations from her around the district tour.

The Cleveland Fed Cleveland Fed's vision is to improve the economic well-being in our communities, our region and our country.

As I close the number four comes to mind.

Why, you ask?

Well, yes, this is best for my fourth month on the job, and Cleveland is the fourth of the 12 Federal Reserve banks.

But perhaps most importantly, Beth is the fourth female president of the Cleveland Fed, following tremendous leadership of Dr. Loretta mester, Sandy PIN, Alto, and the first ever female president of any Fed bank, Karen Horn, back in the eighties.

If you have a question for our guest, you can text it to 3305415794 in the city club staff.

We'll try to work it into the Q&A portion of the program.

Members and friends of the City Club of Cleveland, please welcome Beth Hammack.

Thank you so much.

Thank you.

Thank you for that wonderful introduction and good afternoon.

It's an honor to join the ranks of speakers who've engaged with the City Club of Cleveland.

I'm a fan of your mission to create conversations of consequence that help democracy thrive, and I hope to contribute to that tradition today.

I look forward to your questions in particular, because understanding what's on your minds is an important part of my job as Cleveland Fed President.

I've been in Cleveland for about four months, but it isn't my first time in the city.

My husband grew up in Shaker Heights and his family continues to call the region home.

So I was familiar with the famous area, with the area and its famous lake effect snow.

But as a full time resident, I've been moved by how welcoming the community has been.

Many people have been willing to share their experiences and recommendations and make sure that I enjoy the best that Northeast Ohio has to offer.

A few of my early favorites have, including catching games with the Guardians or Cavaliers, sipping on a Christmas ale and discovering a local pinball spot.

And though I've settled into Cleveland's East Side, I've been pleasantly surprised that you actually don't need a passport to cross the Cuyahoga River.

And that's good, because I found some of my favorite restaurants on the West Side.

I'm impressed with the strong spirit of collaboration amongst the business and community leaders here.

Your commitment to making this region a great place to live and work as a parent in big ways and small.

From the connections between the private sector and nonprofits to education and world class arts, I thank you all for your hospitality and helping me to get to know my wonderful new home.

So a little about me.

Before joining the Cleveland Fed.

I worked in financial markets for 30 years where, when it comes to understanding financial conditions and interest rate dynamics, the Fed is the North Star.

I've also had the opportunity during my career to work directly with financial market policymakers, something I found very rewarding.

It was this aspect the Fed's public service mission that attracted me to the job.

It has been both thrilling and humbling to apply my practical experience to my new role leading the Federal Reserve Bank of Cleveland and our work on behalf of the region and the nation.

When people ask what surprised me most about working at the Fed, I've been struck by how little people know about the breadth of responsibilities.

In my remarks today, I will do my best to demystify the Federal Reserve, and I'll highlight the ways in which my colleagues at the Cleveland Fed play important parts in carrying out our core responsibilities.

I'll also share my views on the current prospects for the Fed's highest profile responsibility, formulating monetary policy for the nation.

Before I begin, I want to note that the views I expressed today are my own, and not necessarily those of the Federal Reserve System or my colleagues on the Federal Open Market Committee.

One thing the City Club and the Fed have in common, and that we stood the test of time.

The City Club was created in 1912, just one year before the Federal Reserve was established.

In 1913, the Fed's origins are tied to the wave of financial crises that swept the country in the late 19th and early 20th centuries.

To their credit, the framers of the Federal Reserve Act saw the need for a central banking system rather than a single entity.

The new system created a decentralized institution with public and private characteristics, one that is uniquely capable of serving the nation's economic and financial interests.

Free from short term political pressures.

So what exactly does this look like in Washington, DC?

The Board of Governors is a federal government agency with seven members who are appointed by the US President and confirmed by the Senate.

Across the country, 12 regional reserve banks, including Cleveland, serve as the operating arms of the Federal Reserve System.

Although we were created by Congress to serve the public, the Reserve banks are not part of the federal government.

Each Reserve Bank has its own board of directors drawn from different parts of the regional community, including business, banking and nonprofit leaders.

The Cleveland Fed represents the fourth Federal Reserve District, encompassing Ohio, parts of Pennsylvania, Kentucky and West Virginia.

The boundaries for each of the districts were based on trade and economic considerations of the early 20th century, when our region was primarily known as a manufacturing hub.

In 2024, the fourth District's economy has evolved beyond its manufacturing roots, with growing education, health care and technology sectors.

The Fed's decentralized structure allows each Reserve Bank to bring on the ground insights into the process of setting policy for the entire nation.

It was a courtesy to my colleagues and with acknowledgment that D.C. can't handle it.

I do leave the lake effect snow at home.

I've already come to rely heavily on the perspectives of the banks directors, including those in our branches in Cincinnati and Pittsburgh, and on our input from our advisory Council members and our contacts across the district.

The real time information they provide is one crucial input into how I think about monetary policy.

However, monetary policy making is just one aspect of the job.

My fellow policymakers and I gather at least eight times a year, and I spend the lion's share of the week before those meetings in intense preparation.

Leaving aside these 56 days of meetings and prep, there are still 200 weekdays left in the year.

I'm sure many of you, like much of my family and friends, are wondering what else we do with the Federal Reserve aside from monetary policy to make use of that time.

So let me give you a quick tour of the Fed's other major responsibilities.

First, the Fed has a responsibility to promote financial stability, which again was the primary reason for our founding more than 100 years ago.

We had a great discussion about this role last month when the bank posted its 12th Annual Financial Stability Conference in partnership with the Office of Financial Research.

The Fed monitors the financial landscape for emerging risks while enforcing rules and regulations aimed at promoting financial system resilience over the longer term.

We also have tools to contain damage if a shock hits the economy.

You may recall the emergency liquidity and funding support the Fed issued in response to economic disruptions caused by the onset of the pandemic, including the Paycheck Protection Program Liquidity Facility, which helped banks extend credit to small businesses via low interest paycheck protection program or PPI loans.

The Cleveland Fed played a part in that program by offering direct support to community development financial institutions closely related to our financial stability responsibility as our supervision and regulation function.

The Fed's Board of Governors controls the regulatory side and has delegated the examination authority to the 12 Reserve Banks.

Our goal here is to ensure that individual banks and other financial institutions operate safely and soundly at the Cleveland Fed.

We have a team of examiners who evaluate more than 260 financial institutions across our district.

When individual institutions are stable and provide valuable credit services to households and businesses, they form the foundations of a strong financial system with examiners serving as boots on the ground.

We're better able to see developments at key firms and in markets that may signal wider trends that could add risk to the financial system as a whole.

Third, on the list of Fed responsibilities is our support for the nation's payment system.

Most of us spend very little time thinking about the payment system.

It's like plumbing, but if something goes wrong, it's a big problem for buying groceries, paying bills and taking care of business expenses.

The Fed's job is to ensure the whole payment system runs smoothly behind the scenes.

The Cleveland Fed also supports the US government's payment service services.

If you've ever made a payment on a student loan or used a credit card to buy a souvenir in a national park gift shop, you've touched applications developed and managed by the Cleveland Fed's Treasury Services team.

Payments also include cash transactions.

Of course, cash alongside paper checks is no longer the predominant medium of exchange.

Since the world has shifted toward electronic payments as such, the Fed is constantly assessing the quantity of currency that will be needed as financial habits change.

The Federal Reserve issues paper currency at its locations across the country, including here in Cleveland.

If you happen to have any cash handy, take a look.

On every denomination of bill, there is a letter and a number printed on the face side.

The letter will be A through L representing the 12 reserve banks, coupled with its corresponding number from 1 to 12.

If you have a bill with a D for congratulations, you're holding a Federal Reserve Bank of Cleveland Note on every fourth district one and $2 bill.

There are two concentric circles around the letter D. The outermost circle says Federal Reserve, Ohio.

The innermost says Bank of Cleveland.

A fourth responsibility of the Fed is to promote consumer protection and community development.

This work takes several forms in support and consumer protection.

Bank examiners at the Cleveland Fed and throughout the Federal Reserve System ensure that financial institutions follow fair lending and fair housing laws and that they are meeting the credit needs of their low and moderate income neighborhoods as prescribed under the Community Reinvestment Act and supporting community development.

Reserve banks have teams of analysts who conduct in-depth research on topics such as affordable housing and occupational mobility.

You can learn more about the Fed's work and community development on Fed communities.

Dot org, which I should add, is a system wide effort.

The Cleveland Fed leads to highlight the research and outreach of community development teams across the 12 reserve banks.

In addition, the Cleveland Fed leads the Federal Reserve system's annual Small Business Credit Survey, which gathers timely information on borrowing conditions for businesses with fewer than 500 employees.

Finally, we employ outreach managers who share insights about the Fed's resources with community members and at the same time listen and learn from the public about the challenges that they face.

That brings me back to the Fed's responsibility to conduct monetary policy.

Monetary policy actions are undertaken by the Federal Open Market Committee, or FOMC, which comprises all 12 presidents of the Reserve Banks and the seven governors I mentioned earlier at the Board of Governors in Washington, D.C., the 12 Reserve Bank presidents rotate their voting years with the exception of the president of the New York Fed, who is a permanent voting member and vice chair of the committee.

The Cleveland Fed president votes an even numbered year, alternating with the Chicago Fed president, who votes an odd year, while most other Reserve Bank presidents vote every three years.

Importantly, whether voting or not, that year, all of us speak at every meeting and listen keenly to learn from one another.

Congress has given the FOMC a dual mandate to achieve maximum employment and stable prices.

This dormant mandate may sound straightforward, but the reality is that the FOMC takes a wide range of information into account in assessing how close or how far we are from these goals and how likely the economy is to reach them both today and over time.

One of the advantages of the decentralized structure is the diversity of views that it brings to the conversation.

My FOMC colleagues and I come from many different backgrounds.

To name a few.

We have former academic economists, bankers, regulators and business consultants on the committee.

I view this diversity of experience as an asset because it allows for a robust discussion from many viewpoints and allows us to address a wide range of issues from positions of deep knowledge.

My background is in financial markets and business.

As such, I rely on the bank's team of research economists to provide a framework for understanding what the theoretical models or empirical data might suggest about the impact of various policy approaches.

My pragmatic approach to monetary policy pairs this analysis of models and data with my reading of the signals that businesses and markets are sending.

Now, with that as a backdrop, let me lay out how I see the current economic landscape, which informs my view on the appropriate stance for monetary policy.

The pandemic and the subsequent closing and reopening of the economy resulted in tremendous swings in activity.

Fortunately, many of these extreme fluctuations are now behind us, but their impacts continue to linger along several dimensions.

Overall, the economy is strong and the labor market is healthy.

Inflation has eased considerably over the last two years, but it remains above the FOMC as objective.

While not a part of our mandate, the broadest measure of economic activity is gross domestic domestic product GDP, which captures spending by consumers, businesses and governments on a wide range of goods and services.

Real GDP, which abstracts from changes in prices, grew nearly two and three quarte This pace of growth is a little is a little above the average rate experience during the ten years before the pandemic induced recession, and it's higher than most estimates of the economy's longer run growth rate.

Consumer spending accounts for more than two thirds of GDP in the national data.

Consumer spending remains strong, supported by the healthy labor market, rising real wages and elevated household wealth.

As I mentioned, an important role for the Reserve Banks is collecting data and anecdotes from their districts to complement official statistics.

Information that the Cleveland Fed's research and community development teams collect from our regional contacts sheds light on changes in customer demand, hiring, pricing and so on.

The conversation with our contacts provide our most timely information on the state of the economy.

This information is usually available before the official economic statistics, which can take time to compile and produce a summary of this qualitative information from the Cleveland Fed and other Reserve banks is released to the public two weeks before every FOMC meeting.

In a publication commonly known as the Beige Book.

The most recent version came out just two days ago.

I also make it a point to talk directly to stakeholders throughout the region about how they and their organization's clients are experiencing the economy.

I find this information highly valuable to provide additional context and nuance behind the national numbers.

And if a bit of a contrast to the national data contacts in the in the banks district reported more modest growth in recent weeks, although they generally expected activity to increase further in the months ahead.

Car dealers in our district have been downbeat.

But other retailers pointed to stronger spending.

That said, a common theme among contacts is the notion of a two speed economic expansion.

More affluent consumers are spending readily.

Meanwhile, lower income consumers are more price conscious and are often experiencing difficulties finding affordable housing, struggling to feed their families and needing to cut discretionary spending in the face of higher prices.

These reports serve as a reminder that the aggregate numbers can match significant differences across households.

Now, let me turn to the labor market.

National data and anecdotes from our district point to a healthy labor market conditions.

Today is a big day among market participants and economists because the Bureau of Labor Statistics issued its monthly employment situation report at 830 this morning.

It showed that the unemployment rate was 4.2% and that total non-farm payroll employment increased by 227,000 in November.

It can be dangerous to focus too much on one release because it may be subject to revisions and reflect idiosyncratic factors like the impact of hurricanes or strikes looking at state at broader trends.

Labor market conditions had eased from where they were in 2022 and 2023 during much of that time.

The labor market was unsustainably tight.

Constrained labor supply and robust labor demand contributed to quickly raising wages and prices.

Today, the unemployment rate is a little higher than it was two years ago, but it's still historically low.

In fact, it's near many estimates of its longer run level.

Job growth has slowed.

The ratio of job vacancies to unemployed workers has declined to levels more in line with pre-pandemic norm.

And wage growth has shown signs of moderating.

Slowing in the labor market has largely happened because of reductions in the number of vacancies and slower hiring.

Reports of layoffs remain limited, both in the National data and regionally.

Business contacts report that there are more candidates available for jobs than had been the case even a year ago, a situation which is producing upward pressure on wages.

Finding a better balance between supply and demand in general has been necessary to tackle elevated inflation.

The good news is that inflation, which is the rate of change of prices, has come down considerably from where it had been.

Not quite as good as good news is it's still not back to where we want it to be.

And it's important to acknowledge that a period of elevated inflation leads to a large increase in the price level one, which is unlikely to be undone.

The FOMC preferred measure of inflation is based on the price index for personal consumption expenditures.

What you might know as PC inflation.

Inflation as measured by the Consumer Price Index or CPI generally runs a little bit higher but has followed a similar pattern.

You see inflation peaked at 7.2% in June of 2022.

As of this October, it had fallen to 2.3%, helped recently by declines in energy prices.

Economists and policymakers also consider a variety of other inflation measures to assess the role of outliers and to extract the trend in prices.

These measures are generally higher than the most recent inflation reading, suggesting that a portion of the decline in headline inflation may not be sustained.

The Cleveland Fed has long been a leader in studying inflation, and the bank's Center for Inflation Research produces displays a number of useful inflation measures and other resources for economists, policymakers and the interested public.

The FOMC judges that the inflation rate of 2% over the longer run is most consistent with our mandate for price stability.

The economy has made it most of the way to this objective, but there is still further to go and success is not assured.

The monthly inflation readings in the last two months moved up from where they had been this summer, indicating that the disinflation process has slowed.

While some components inflation rates have returned to where they were before the pandemic, when inflation was running at or below 2%.

Other components inflation rates have not.

One indicator we are watching closely is the ability of our business contacts to raise prices.

Currently, our contacts are reporting that it has become more challenging to raise their prices, something which may may foreshadow further easing of price pressures ahead.

The experience of the last few years has reinforced that elevated inflation imposes both real and perceived costs.

The challenge for monetary policy is to stick, is to sustain the healthy labor market conditions we have been experiencing while finishing the job of bringing inflation back to 2% on a sustained basis.

There is more work to do.

The US economy at this time has a good amount of momentum and a history of surprising resilience.

For example, in the first half of 2023, the survey of professional forecasters captured the expectation that GDP growth would be low, ostensibly reflecting rising interest rates to combat inflation.

Instead, the economy grew at an above trend pace that year.

Resilient growth, healthy labor market and still elevated inflation suggests to me that it remains appropriate to maintain a modestly restrictive stance for monetary policy for some time.

Such a policy stance will help to sustainably return inflation all the way back to 2% in a timely fashion.

It's difficult to know precisely how restrictive our current policy setting is.

Large fiscal deficits, elevated productivity growth and the Fed's ample reserves framework with many long duration securities on the balance sheet are just some of the challenges we face in assessing what constitutes a neutral stance of policy.

One which neither stimulates nor restricts the economy.

Some of the forces that appeared to be holding down the neutral rate following the global financial crisis may have finally run their course or reversed.

In addition, even estimates from the most sophisticated models of neutral rates tend to have a great deal of uncertainty around them.

As I take into account strong economic growth, the low unemployment rate still elevated inflation and signals from financial markets, amongst other factors.

My overall view is that monetary policy is only somewhat restrictive today, and economists speak given our sustained, robust GDP growth.

With you close to you star and Pi close to pi star, perhaps R is already close to our star as well.

Or to put it in plain English, we may not be too far from a neutral setting today.

The target range for the federal funds rate is the FOMC, its primary tool for communicating and implementing monetary policy.

At our last two meetings in September and November.

The FOMC reduced the Fed funds target, which is now in a range of four and a half to four and three quarter percent.

I supported these actions to recalibrate the stance of policy, reflecting the improvements seen thus far in reducing inflation to balance the need to maintain a modestly restrictive stance for monetary policy, with the possibility that policy may not be far from neutral.

I believe we are at or near the point where it makes sense to slow the pace of rate reductions.

Moving slowly will allow us to calibrate policy to the appropriately restrictive level over time, given the underlying strength in the economy.

Indeed, since my initial foray into forecasting in the September summary of economic projections, inflation, growth and the labor market have all been stronger than I and the median had expected.

To me, this situation calls for a slower pace of rate cuts relative to my September forecast.

Achieving our goals means seeing further convincing evidence that inflation is indeed continuing to decline to 2% while sustaining a healthy labor market.

The 1990s provided two separate episodes in which the FOMC reduced the federal funds rate by 75 basis points and held it there for a time.

While today's economy has both parallels to and differences from that era, I see those shallow mid-cycle rate cuts as a relatively successful precedent for helping to sustain a long expansion.

Though I hope not to experience another bubble in equity prices along the way, it will be necessary to monitor financial conditions alongside a broad range of economic data and anecdotes from the business community to guide our decisions.

As of yesterday, financial markets appear to be pricing in about one reduction in the federal funds target range between now and the end of January and only a few cumulative reductions by the end of 2025.

This path is consistent with my current expectation for the Fed funds rate.

Based on my forecast that features solid economic growth, a low unemployment rate and gradual improvements in inflation, However, the incoming data, the outlook and the balance of risks will ultimately determine the future path of interest rates.

As with any forecast, there are risks on both sides of my expected policy path.

Keeping interest rates higher than needed could unnecessarily harm the health of the labor market.

But easing interest rates too much or too quickly could slow the return of inflation to 2% and contribute to froth in financial markets, a situation that could undermine financial stability and impede our progress on our monetary policy goals.

As long as inflation is above our objective and the labor market remains strong.

My focus remains on finishing the task at hand.

Admittedly, it's a careful balancing act.

There are more data releases between now and the next FOMC meeting that will help us to shape the outlook.

I look forward to discussing my observations with my colleagues at the FOMC table and will maintain an open mind about the decision that will best position monetary policy to achieve maximum employment and price stability objectives.

So let me leave this where I began.

I'm really excited to be in Cleveland.

Despite the lake effect snow to best represent the fourth Federal Reserve District.

I need to hear from you about what you're seeing in your businesses and communities.

I encourage you to get involved.

We need people in our business community to serve as Facebook contacts and advisory Council members.

Our Small Business Credit survey benefits when more small business owners participate.

Our community development teams are ready to engage with you on the hard problems facing low and moderate income people and neighborhoods.

You can find more information and ways to work with us on Cleveland Fed, Dawg.

I hope all of you take away from my remarks that the Cleveland Fed is a resource for the communities that we serve and that our employees are of this communities.

I'm proud to call Cleveland home.

I very much appreciate the opportunity to talk with you today, and I look forward to your questions.

Okay.

We are about to begin the audience Q&A for our live stream and radio audience.

I'm Mark Ross, president of the City Club Board of Directors.

And today we are hearing from Beth M Hammack, president and CEO of the Federal Reserve Bank of Cleveland.

We welcome questions from everyone City club members, guests, students, as well as those joining our live stream at City Club Dawg or live radio broadcast at 89.7 Ideastream Public Media.

If you'd like to text a question for our speaker, please text it to 3305415794.

And the City club staff will try to work and into the program.

May we have our first question?

Send us a text question.

It says Trade offs have clearly been a focal point of the expected agenda of the incoming Trump administration.

What modeling, if any, has the Fed done around potential impacts?

And as it pertains to Ohio and other cities in the Rust Belt?

Caterer's actually be a catalyst to help rebuild our manufacturing economy.

So we pay a lot of attention to how the economic picture is going to evolve.

But as it relates to new policies that the administration and the incoming administration might undertake, we don't make any decisions or react to them before we know what those policies are.

So it's too soon right now for us to say what type of an impact tariffs could have and exactly what form those terrorists are going to take.

So we try to take our time and wait to make sure that we know what the policies are before we respond to them.

Hi.

Hi.

So how will the Fed's monetary policy change as interest payments on the national debt take up a greater or greater portion of each year's federal budget?

It's a great question and it's something that I spend a lot of time thinking about.

As Chair Powell had noted, the US debt seems to be on an unsustainable path of growth.

But unfortunately, this is not something that the Federal Reserve has any oversight into the amount of debt that's really that's really dictated by Congress.

And so our goals in setting monetary policy will be independent of where the national debt is.

Our goals will be to maintain that maximum employment and price stability over the longer term.

And so we'll respond to those signals in the economy as we look to set the right the right level of rates.

Two questions, Beth.

One personal, one professional.

Personally, you were in a very high profile, active job on Wall Street, and.

This job sounds.

After hearing you speak, much more research based and not as interactive.

So if you can talk about why you decided to make that change.

And then my second question professionally, as we watch CNBC or whatever we get, you get the impression that Powell makes every decision like we don't hear about anybody, but him.

So could you talk a little bit about how much input he has versus everybody else's staff?

I'll start with the first one, which is, yes, the pace of this job is very different from the pace of my last job, but it's still very interactive.

As I talked about, one of the most important parts of the job is really hearing from all of you, hearing from district members about what they're experiencing so that I can accurately represent what's going on in the fourth District.

When I go down to Washington.

So that part of it, the human interaction, is the same.

Yes.

The research angle and the fact that we move more deliberately and slowly is quite different from Wall Street.

But it's refreshing and it's appropriate given the impact of the decisions that we're making.

You wouldn't want us making these decisions quickly.

You want us to be thoughtful, methodical and deliberate in how we're positioning policy as it relates to whether or not Jay is the sole person making all of the decisions.

We are a committee, and I think that the the strength of our system is that we do have so many perspectives that are brought to bear.

There is communication amongst the committee.

All 12 presidents meet somewhat regularly outside of the the FOMC meetings and the board of governors, you know, present their views as well.

So there's not any one person who is steering things, although as the chair, he obviously sets the tone and leads our deliberations.

That coin.

How does the Fed take into account all of the especially renewed interest in Bitcoin and how much impact does that have on policy?

We monitor a lot of developments across the broad financial spectrum and Bitcoin and emerging payments technology is an emerging asset classes.

It's something that obviously we pay attention to, both from a financial stability perspective and from our role in the payment system to make sure that we understand exactly how it would be used, where things are transforming and what individuals are looking for.

So it's a space that we're watching.

We don't have any direct involvement in in Bitcoin.

There has been some work done at the Federal Reserve System across the Federal Reserve system into central bank digital currencies potentially, But that's something that we would need Congress to mandate that they wanted us to undertake, which they haven't done yet.

So we're we're watching, we're learning, we're studying, we're trying to stay on top of emerging trends as best we can.

My name is requesting from our senior consulting group, a management consulting business from Cleveland, Ohio, since 1989.

You touched on inflation.

So my question is around inflation.

What would be Fed's approach for controlling inflation under your leadership?

So again, I'm one of the 19 members of the committee who come together.

My views, as I right now in the speech, are that the economy is in a really good place.

The economy is strong and healthy.

The labor market, including the data we got this morning, shows a picture of a pretty healthy labor market growth has been solid.

GDP continues to do well, but inflation has been above target.

And to me, one of the real issues is that when I talk to people across the region, what I hear is that that bottom part of the income spectrum is really struggling.

You see that these higher prices and the fact that we're continuing to see elevated prices relative to what we'd like to see in the longer term is really impacting those that bottom part of the consumer space in a very significant way.

And so to me, when I look at the balance of risks, I'm really focused on making sure we get inflation under control back to our 2% target rather than preemptively over easing for some potential weakness in labor that we just haven't seen yet.

Hi, Max Upton.

I work in municipal economic development here in northeast Ohio.

I'm an avid reader and I don't know if you've ever read Stephanie Carlton's book, The Deficit Myth, where she suggests something called Modern Monetary Theory, suggests that there's way too much of the the conversation being soaked up by talking about deficits and debt and that as a nation with its own fiat currency, we can essentially print money with the only real indicator as to whether or not we should be shrinking the supply of money is inflation.

And that and that a lot of the other stuff is just kind of noise in the system.

So I wonder if you had any thoughts in relation to that.

Yeah, we try to stay on top of a lot of different theories that are out there around what could impact policy, what could impact the overall economy and growth generally.

As I said before, I personally agree with Chair Powell and think that our debt outstanding is on an unsustainable path of growth.

We are headed on a path that leads us well north of 140% of GDP at the current time.

And that has me concerned about what those implications could be more broadly.

But it's something we'll continue to watch and think carefully about.

Good afternoon.

I'm Stephanie McHenry, CEO of the Democracy Collaborative.

We're a nonprofit that focuses on implementing more democratic little D forms of the economy.

My question is about the data that you collect.

You made reference to, at least on one occasion, some disaggregated data.

And I'm wondering to what degree do you disaggregate your data around unemployment inflation for both demographic demographics since this track, etc.?

And then how does that drive your community development strategy?

Yeah, our community development strategy is is really it's data driven.

It's it's contact based.

We're really trying to be out there in the community and understand what are some emerging trends.

And for us, the real the real reason, what I think about it is why we're involved in the community development work is because we want everyone to be able to participate in our economy and to be able to have economic opportunity.

And so when we step back and think about what are our priorities in the community development space, it's really around what are those barriers to work, what are keeping people from entering the workforce, whether that be housing, food insecurity, childcare, transportation.

And so the team is out there talking to different organizations about about the different new methods or new programs, what's going to have the biggest impact?

And then we take it data driven approach to actually analyzing that and then amplifying it.

So we take the research on the back of that and we try to help share those best practices around the district and the nation so that hopefully people can take advantage of those those things.

So earlier this week I was at the Cleveland Foodbank, which has just a fantastic model and I was excited to see and a similar model to one that a UN organization that we met down in Cincinnati called the Brighton Group, where they're really trying to do these wraparound services.

And so you come in because you're hungry, but in the same building they've got the United Way, they've got jobs, Ohio, they've got housing advocates and they've got people who can help you with so many different aspects, because usually when you are suffering from one thing, there are so many other aspects that come together to impede your ability to really participate in the workforce.

And so we're trying to study those types of exciting projects and try to help get ideas out there to to amplify that work.

Hi.

After a number of bank failures in the first half of 2023, how have your bank examiners changed their approach?

Our bank examiners have a very consistent approach in terms of looking at and working with the banks that we supervise to ensure that they are safe and sound and well capitalized.

There certainly has been a focus on liquidity in addition to capital, given the the failure that we saw of Silicon Valley Bank and a couple of other institutions.

And so we've been looking carefully at what the right rules are to be able to support those institutions.

The good news is that the banking system is in a very healthy place.

We feel very good about where they are today and we do have tools available like we had in 2020, in 2008 and in 2023.

If something should go awry.

We have another test question.

It's, as you mentioned, the FOMC meeting.

This outcome of these meetings boils down to a decision about interest rates, Fed charges usually 25 basis points in one direction or another or no change.

Can you bring us into inside of a meeting and share that kind of dialog?

That is a change and how that translates into a interest rate decision?

Sure.

So you can read the transcripts of our meetings if you are so interested.

They get released with a five year delay, so you can't see the most recent ones, but you can see the structure of the meeting is very similar from from event to that.

The way that it usually kicks off as we get an update from the New York markets desk that tells you about financial markets and what's happening there.

The board staff then walks through their economic forecast, how they see the broad picture of what's going on in the economy, both domestically and internationally.

There's a round of questions from the committee around any of that that that data that's been provided.

And then everyone in the committee, all 19 of us, do what we call an economic go round.

Everyone gives a statement somewhere between two and 7 minutes in length about how you see the economy, what's going on in your district.

And I find that what I'm presenting, what's most impactful is having these anecdotes and stories from the region to help make that data come alive.

Then we're presented with a series of choices.

They do map out A choice A, B, and C, which can be raised 25.

No change or drop.

It has accompanying language with it.

And then we go through and everyone presents their view on policy and what they think we should do, whether they support options A, B or C, And then at the end of that period, we take an actual vote.

So not all 19 members are voting at each meeting.

Again, it's all seven of the governors vote at every meeting.

The New York Fed president and then four other bank presidents will vote.

And so we take that vote.

And then at 2:00 it gets released in our official statement.

And the chair follows that up with a press conference to help explain and give more nuance to the decision that we've taken.

Good afternoon.

My name is Luke Kim.

I'm a senior at Solon High School, a member of the Youth Forum Council here, and I study economics at Case.

My question is reflecting on the past two recessions, the Great Recession and the pandemic, and the Fed's responses and quantitative easing since then.

What are your takeaways into how to address recessions or downward stages in the business cycle in the future?

Yeah, I mean, those two those two events were radically different, right?

One was sort of a very deep and elongated recession.

And then what we saw in the pandemic was actually very short and obviously very unusual circumstances.

We we have the teams who are trying to look at these types of events and see what policy tools are really helpful.

And this is a place where our Center for Inflation Research really comes in handy.

My economics team, some of whom are sitting over there, so that's why I keep pointing in this direction.

I spend a lot of time thinking about what are some of the drivers that put us into a recession?

What are some of the tools, policy tools that we have to help take us out of that?

I think that the Fed did a really outstanding job.

I wasn't I wasn't at the Fed, so I'm not bragging.

Did an outstanding through the 2020 crisis to help make sure that we mobilized the economy, that they mobilized the balance sheet to be able to smooth some of the events and difficulties that were being felt by individuals and businesses throughout the country during those those early months of the pandemic to really help steer us in a good place.

How much of the economic resilience can be attributed to robust consumer spending?

Is it spending backed by real purchasing power or by the consumer debt?

How concerned is the Fed on an increase in consumer debt default rates?

So we do pay a lot of attention to what's going on with the consumer.

And the consumer has been really supporting the economy in a material way over the past couple of years.

I have an offbeat question, and that is how is generative artificial intelligence entering into your work?

You'd think that might have a role and be interested as to what experiments you are doing in this area.

Yeah, we spend a lot of time thinking about, you know, as I mentioned, thinking about all the different trends and risks that are out there and generative.

AI to me is a really exciting technology that could help to keep the economy moving.

One of the things that's actually really good for economic growth is when you have productivity growth and generative AI, generative AI is one potential source of that productivity growth, which means that you can have underlying growth, which with much less inflation.

When I was in San Francisco in October, I was with my colleague Mary Daly, who runs the San Fran Fed.

And we we rode in a robotaxi which didn't even have a steering wheel.

It's like a purpose driven vehicle that drives around.

And so there's a lot of exciting things that are going on around this technology.

We at the Fed are not using it.

We're very cautious about how we're using this.

Humans are the only ones who are making decisions.

As we as we move forward.

But our teams of economic researchers are looking at the technology.

We think about it.

What benefits could it have for us and also what impacts could it have more broadly for the fourth District in the nation?

How can we get involved to support you and the Cleveland Fed?

I love that question.

There is a lot of different ways that you can get involved to help to help us.

As I mentioned, Fed the Cleveland Fed dot org is our website and we have a lot of different places.

If you're a business leader sharing your business insights with our Beige Book team so that we understand your perspective on what's going on, the economy is critically important.

If you're a community organization or community leader, we'd love to know more about what it is that you're doing.

And actually we use that information, our Beige book as well, because we want to represent the full picture.

If you run a small business, we just closed our small business credit survey, which gets about a little more than 10,000 respondents to it across the nation.

But that will be kicking up again next year.

So please reach out to one of my team who are at this table, table ten over here, and give us your contact information.

We would love to get in touch and hear from you about what you're experiencing.

And finally, my door is open, so my email is available through the for the website.

I'm happy to share my card with you today.

I would love to hear from all of you about what you're experiencing, what you think the challenges are.

My job is really to represent each of you in Washington and to make sure that we're steering the economy to have the best potential for everyone.

Thank you so much for joining us at the City Club today.

There's a lot of pressure in the real estate sector right now in commercial real estate.

It's sort of the opposite of what's being experienced in housing, residential real estate.

And I wonder if you could talk about how the Cleveland Fed views this, what they view as the problem and the root of the problem and how your counterparts across the country are dealing with it and sort of where Cleveland fits.

I know that, for instance, San Francisco has a lot of pressure.

Our pressure might seem modest by comparison.

Thanks.

Yeah.

Housing is certainly an area that we're spending a lot of time focusing on.

There's a lot that's going on in housing, well, in real estate.

And it's and it's a broad it's a broad swath of different experiences.

When you look at the commercial real estate market, you look at the residential housing markets, you look at the multifamily markets.

It's a place where, you know, we continue to pay close attention.

Our team at the Cleveland Fed has done some work, in particular around housing inflation and the stickiness and housing inflation and really looking at the experience of of renters and whether you're a new renter or whether you're persisting in the same place and the different levels of inflation that happen.

And part of this research is one of the things that leads me to think that inflation could be a bit stickier, because when we back out all the very technical details on the math of, you know, the different experiences that people have when it ultimately says is that this housing inflation, which has been really the stickiest part of inflation that we've seen, is going to take a lot longer to come down back towards our target.

And so we think that there are some reasons, given this, these nuances, why inflation could stay a bit higher.

The other part I'd say that we're focused on is commercial real estate and certainly office properties in downtowns.

And I think Cleveland, like Cincinnati, like Columbus, like a lot of other downtowns, like Pittsburgh, has had a lot of challenges as this new work from home phenomenon.

Office buildings are not being as occupied as they had been in the past.

And there's a lot of focus, both from an economic perspective, but also from a banking supervision perspective as to what's going on in the commercial real estate sectors.

How worried do we need to be where do we think those concentrations are and where ultimately will that go?

So it's something that we are spending a lot of time thinking about.

Thank you for being here.

I'm Bill Keller on the CEO of Team Yeo.

Your team has been incredibly valued and consistent partner for our work to encourage business investment here, and I want to acknowledge them for that.

And thank you for your continued support in that area.

My questions about transparency in particular under Chairman Powells tenure, you and your colleagues over time have been individually more vocal, invisible around your different rate views and sometimes it seems to me increasing the volatility in the markets as a result.

I'm wondering what you do in the background to sync those kinds of points of view and manage those messages so you can guide the kinds of end outcomes you ultimately want.

Well, thank you for acknowledging the team.

I've been I'm been very fortunate to inherit such an amazing team, and so I'm proud to be able to help continue supporting their work and the amazing stuff that they do every day as it relates to our communications.

I know there's a lot of theories about are there too many of us?

Are there too many of us talking all the time?

Is that helpful?

Is it not helpful?

How do we do it?

The reality is we don't coordinate.

We talk to one another.

We have dialog.

But our primary means of communication really is that FOMC meeting and the statement that we all agree to coming out of it.

I think what the communications, what I aim to do through communications like this and I think I'll just I'll speak for myself.

What I aim to do through these types of communications is give you a little bit more nuance and a little bit more color behind my thought process, which hopefully helps business leaders and markets to understand how I might react to new data that comes out.

And so I think that when the public broadly understands our reaction function better, hopefully you can make better decisions regarding your businesses and your personal expenditures to understand how things might play out if the world transpires differently than the way we see it today.

That's the benefit, I think.

But we don't we don't particularly coordinate.

Thank you.

From your perspective, are the economic consequences of climate change measurable and are they considered in your deliberations?

It's not something that we've considered in our deliberations.

Again, as I mentioned, we think about a lot of risks to the broad economy and certainly the change in weather patterns and the change in how the insurance industry is approaching pricing due to some of those changes in weather patterns is something that we look at the back end of and the implications of that and that factors into policy.

But I don't I don't see climate change broadly directly as having a place in our remit, but I think it's more the implications of the impacts of what may transpire from that that we need to incorporate into our policy and how we think about things.

Could you expand on the to economic recovery of the more affluent versus the working class that I believe you mentioned in the Beige Book?

What could be done to strengthen the working class?

It's a great question and it's something we spend a lot of time thinking about.

Unfortunately, monetary policy is a pretty blunt instrument.

Our main tools are interest rates and our balance sheet, but predominantly the interest rate setting that we can use to fix some of the issues at the lower end of the spectrum, at the lower income end of the spectrum, I think you really need Congress or local leaders to help help set policies.

There.

And unfortunately, that's beyond our remit.

And so what we aim to do is we aim to, as I mentioned, through our community development work, look at where we're seeing successes, where are we seeing private solutions that are coming together to really help make the economy more available and more attractive?

And what are ways that we can help get more people into the labor force, remove some of those barriers to work and get people out there?

Good afternoon.

We have a text question.

The next administration has said it wishes to deport millions of people.

Many expect that to have a significant effect on the labor market, potentially raising inflation.

If that comes to pass, what might the Fed do to mitigate those effects?

Again, there's a lot that's been talked about and policies from the administration that will be in coming in late January.

We're not going to react to anything until we actually see what those policies are.

Our policies have a way of kind of winding around and changing through the the discussion, deliberation and enactment phase.

And so it's wise for us, given the impact of our decisions and the time it takes for monetary policy to work, to wait and see what those decisions are before we respond to them do you anticipate pressure from the incoming administration to increase efficiency in operations?

We always try to be good stewards of taxpayer dollars.

We are not a government agency, but any any any remittances or any any overages in our budget go back to Treasury in aggregate across the system.

And so we try to be good stewards of taxpayer dollars in that way and ensure that we are doing our best for the for the country.

I will have to wait and see what this new administration chooses to do.

Is there a strategy that an a tactic team at the Federal Reserve Bank that works to intentionally share your research with policymakers, both at the local regional and federal level?

Absolutely.

It's a great question.

We have a lot of work that we put out.

We try to amplify it as best we can, but I welcome all of you helping us to do that.

We use social media channels, we use our website, we use conferences that we host.

So as I mentioned, we had a financial stability conference a few weeks ago.

We had our Center for Inflation Research Inflation Conference a few months ago.

That was in October.

We have a big conference coming up in June, which is our policy summit, where we bring together policymakers and community leaders to talk about some of these solutions.

And some of them are.